Vanguard Asset Management, previously one of the biggest bulls on Japanese government debt, hit pause on a steady buying spree of the nation’s long-dated bonds at the start of the year.

The asset manager stepped away from its bet before Prime Minister Sanae Takaichi’s decision to call a snap election and pitch for deep tax cuts roiled the Japanese debt market, propelling yields on long maturities nearly 30 basis to record highs.

“It’s been a perfect storm for long-dated JGBs (Japanese government bonds),” said Ales Koutny, head of international rates at Vanguard’s active funds, adding “there are limits to how much unfunded fiscal spending a country can do.”

Koutny had been among foreign investors piling into long-dated Japanese government bonds in anticipation that more interest-rate hikes by the Bank of Japan would flatten the yield curve and prompt more demand for longer-dated debt. While many investors continued to buy, even as yields continued to soar after Takaichi took office in October, the latest jump and a crank up in volatility is testing investors’ appetite.

Weak demand at a 20-year auction on Tuesday, alongside a report showing that 91AV原创 life insurers have been selling long-dated bonds and “noise” around further fiscal spending, have all led to the surge in the 30-year yield, according to Koutny.

What has riled investors is Takaichi’s promise to temporarily lower sales tax on food in order to strengthen her slim majority in the country’s Lower House. The move renewed concerns about her desire to pursue expansionary fiscal policies.

With Japan relying on more than 20% of its revenue from consumption tax, Koutny said, “any tinkering around there has a meaningful impact for the fiscal position of the government.”

To be sure, not all fund managers have been scared off by the recent turmoil. Ranjiv Mann, a senior portfolio manager at Allianz Global Investors, said he was “actively discussing potential opportunities” in Japanese government bonds Tuesday, while as recently as last week, Pacific Investment Management’s Andrew Balls saw opportunities in market volatility.

For Vanguard’s Koutny, a shift to more prudent fiscal spending plans or a hawkish turn by the BOJ to commit to a rate hike in March or April “would be key for us to resume any buying.”